APPENDIX 401 



charge for marketing. The sum of the two charges is suffi- 

 cient to balance the credit for the sale at market price. 



The poultry or cattle receive the same net gain when trans- 

 ferred to the household at market price less cost of marketing 

 that they would if their products were sold elsewhere at mar- 

 ket price, but the cost of marketing was debited to the poultry 

 or cattle accounts. 



When the garden is treated as in Chapter IX, the question 

 of prices for garden truck does not arise. 



Rate of Interest on Investment. A rate of 4% a year is 

 suggested as the most reasonable rate to use in calculating in- 

 terest on investment in land. It is the most reasonable (1), 

 because it permits a fair rate of return on capital for so 

 stable an investment, and (2), because it is a rate which will 

 result in a fair comparison of results of the farms operated 

 by owners and those operated by tenants. 



Considering the first reason mentioned, 5% or 6% are more 

 often quoted as the rates of return one could expect if he 

 invested his money elsewhere than in a farm. One might add 

 that, if the farmer wished, he could sell his farm and invest 

 his money in 2 l / 2 % government bonds or in the postal savings 

 bank, either of which is considered as a standard of safety in 

 investment; or he might invest in 10% stock of a corporation, 

 whose dividends in the future are somewhat uncertain, and 

 the value of whose property is questionable. 



In determining the rate to charge for investment in land, 

 one should consider the rate of interest that could be obtained 

 if the farmer were to sell his property and invest in some- 

 thing equally safe. The most logical investment to consider 

 equally safe, is another farm in the same vicinity. Stating 

 the proposition in another way, then, the rate of interest to 

 be charged by the owner should be the same as the rate of 

 interest he would receive from his farm, if he were to move 

 away and rent it to someone else. Four per cent is fairly well 

 established by investigation 1 as being nearest to the net annual 

 rate of return which the average farmer does receive on his 

 farm when he rents it to a tenant. 



1 U, S. Department of Agriculture Bulletin No. 41, 



